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Senate committee approves tougher derivatives rules

WASHINGTON — A Senate panel on Wednesday advanced the toughest limits yet on banks' ability to profit from complex financial tools called derivatives.

The bill offered by Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., would also improve transparency of most derivative trades.

The legislation was approved on a 13-8 vote. Sen. Charles Grassley, R-Iowa, joined the panel's 12 Democrats in supporting the measure. He earlier had supported a Republican substitute amendment that would have softened the bill's strongest provisions.

Lincoln's derivatives bill is expected to be incorporated into the broader regulatory legislation before it is taken up by the full Senate. But many are skeptical a provision barring big banks from running derivatives desks will survive. Lincoln said after the committee vote that she did not know which provisions would end up in the final bill.

Under Lincoln's bill and other Democratic proposals, companies such as AIG would be subject to closer regulation. They also would have to keep minimum levels of capital to protect against market downturns.

All the major plans would require that most derivatives be settled in a centralized system and traded over exchanges. Supporters say this would improve market transparency, drive down prices for users of derivatives and provide more information to regulators.

What sets Lincoln's bill apart is a rule that would bar companies that receive federal guarantees, like insurance from the Federal Deposit Insurance Corp., from most derivatives activities. That would shut down a revenue stream that's become more important for banks as lending has declined.

House passes vets relief bill

Family members of severely wounded Iraq and Afghanistan veterans who forgo jobs and health insurance to provide care for an injured loved one would get relief under a bill unanimously passed by the House on Wednesday. The estimated $1.7 billion in caregiver benefits over a five-year period was part of comprehensive veterans legislation that would open the door wider for the VA to offer assistance to veterans' family members. It instructs the VA to create a childcare pilot program offer post-delivery care to female veterans' newborns and work with the Pentagon on a study on veterans suicide. The bill passed 419-0. It now goes back to the Senate.

Senate committee approves tougher derivatives rules 04/22/10 [Last modified: Thursday, April 22, 2010 12:35am]
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